Meritor Inc. has reported financial results for its first fiscal quarter ended December 31, 2015.
First-Quarter Highlights
- Sales were $809 million, down $70 million, or approximately 8%, from the same period last year.
- Net income attributable to Meritor from continuing operations on a GAAP basis was $28 million, or $0.30 per diluted share, compared to $32 million, or $0.32 per diluted share, in the same period last year.
- Adjusted income from continuing operations was $31 million, or adjusted diluted earnings per share of $0.33, compared to $36 million, or adjusted diluted earnings per share of $0.36, in the same period last year.
- Adjusted EBITDA was $76 million, compared to $79 million in the same period last year. Adjusted EBITDA margin was 9.4% for the quarter, compared to 9.0% in the same period last year.
- Free cash flow was negative $27 million in the first quarter of fiscal year 2016, compared to negative $21 million in the same period last year.
First-Quarter Results
For the first quarter of fiscal year 2016, Meritor posted sales of $809 million, down $70 million, or approximately 8%, from the same period last year. The decrease in sales was driven by the effect of foreign exchange translation in Europe and Brazil and weak economic conditions in South America.
Net income attributable to Meritor from continuing operations on a GAAP basis was $28 million, or $0.30 per diluted share, compared to $32 million, or $0.32 per diluted share, in the same period last year.
Adjusted income from continuing operations in the first quarter of fiscal year 2016 was $31 million, or adjusted diluted earnings per share of $0.33, compared to $36 million, or adjusted diluted earnings per share of $0.36, in the same period last year.
Adjusted EBITDA was $76 million, compared to $79 million in the first quarter of fiscal year 2015. Adjusted EBITDA margin for the first quarter of fiscal year 2016 was 9.4%, compared to 9.0% in the same period last year. Revenue declines which impacted Adjusted EBITDA margin were more than offset by lower material costs and a favorable insurance recovery related to legacy asbestos liabilities.
Cash flow from operating activities in the first quarter of fiscal year 2016 was negative $5 million, compared to negative $9 million in the same period last year. Free cash flow was negative $27 million, compared to negative $21 million in the same period last year, primarily due to increased working capital relative to the prior year.
First-Quarter Segment Results
Commercial Truck & Industrial sales for the first quarter of fiscal year 2016 were $633 million, down $70 million compared to the same period last year. The decrease in sales was driven by the effect of foreign exchange translation in Europe and Brazil and weak economic conditions in South America.
Segment EBITDA for the Commercial Truck & Industrial segment was $52 million for the quarter, down $4 million from the first quarter of fiscal year 2015. Segment EBITDA margin increased to 8.2%, up from 8.0% in the same period last year. The increase in segment EBITDA margin was driven primarily by lower material, labor and burden costs.
The Aftermarket & Trailer segment posted sales of $203 million, down $5 million from the same period a year ago. The decrease in sales for the aftermarket business was primarily due to currency translation that impacted the European aftermarket business.
Segment EBITDA for Aftermarket & Trailer was $20 million for the quarter, down $5 million from the first quarter of fiscal year 2015. Segment EBITDA margin declined 2.1 percentage points to 9.9%, compared to 12% in the same period last year. The decline was due to foreign currency impacts along with one-time costs associated with the launch of a new warehouse system.
Outlook for Fiscal Year 2016
The company is revising its guidance for fiscal year 2016 as follows:
- Revenue to be approximately $3.4 billion as compared to the prior outlook in the range of $3.4 billion to $3.5 billion.
- Adjusted EBITDA margin is unchanged from the prior expectation of 10.0%.
- Adjusted diluted earnings per share from continuing operations to be in the range of $1.65-$1.75 compared to the prior outlook of $1.70-$1.80.
- Free cash flow to be approximately $110 million as compared to $115 million in the prior outlook.
Meritor anticipates the following for the entire company:
- Capital expenditures of approximately $90 million.
- Interest expense in the range of $80 million to $90 million.
- Cash interest in the range of $65 million to $75 million.
- Effective income tax rate of approximately 15%.
"Despite the impact of lower production expectations in North America, we continue to execute well," says Jay Craig, CEO and President. "Following another strong quarter, we remain committed – and on track – to achieving our M2016 metrics for margin enhancement, debt reduction and new business wins."
